Hedge funds suffered a 1.53% drop in August, according to the Credit Suisse/Tremont Hedge Fund Index.

“In August, the subprime mortgage contagion led to a widespread sell off that swept equities, commodities and low-grade credit markets. The sell off was exacerbated by the highest jump in the overnight loan rate in over six years and banks and brokerages reported declining values in credit investments,” said Oliver Schupp, president, Credit Suisse Index Co.

“Correspondingly, inflation in China accelerated to the highest rate in more than 10 years, volatility soared and U.S. consumer confidence reached its lowest level since 2005,” he said.

“Overall, this market environment has negatively impacted the performance of all hedge fund sectors within the Credit Suisse/Tremont Hedge Fund Index. The managed futures sector was particularly affected, down 4.61% as an overall flight to quality by investors fuelled by subprime and credit-related concerns triggered reversals in most of the established trends (including energy, fixed income, and currencies) in the sector,” Schupp added.

The index is comprised of 456 funds, drawn from a database of more than 5,000 hedge funds, as of Aug. 31. The firm noted that a few funds have been removed from the index: Copper Beech Fund and Bear Stearns High Grade Structured Credit Strategies Master Fund Ltd.

Additionally, the Credit Suisse/Tremont Investable Hedge Fund Index was down an estimated 1.89% net for the month of August. In July, it was down 0.85%. The investable index is designed to give investors broad exposure to hedge funds as an asset class.